JANUARY, for many businesses, is often a time for reflection and forward planning - and that is particularly true for high street retailers.

The likes of Next, Boots, Argos and Marks & Spencer have been reporting back in recent weeks with financial results from their most crucial period of the year.

The continuing boom in consumer credit (and a dash of retailing nous) meant like-for-like sales rises for Dixons, Woolworths, Boots and Next, which all demonstrated the underrated skill of predicting the potential market and getting the right product on display.

Boots beat market expectations with a 4.1 per cent rise, while Next enjoyed a bumper Christmas with the sale of full-price goods well above expectations. Anthony Platts, retail analyst with Wise Speke, said there were some disappointments. For example, Marks & Spencer and Matalan saw falls in clothing sales. But on the whole, he said, shoppers were in a comfort zone of positive equity - happy to buy now and pay later.

He said: "Spending has advanced at a pace well in excess of the growth in disposable incomes, financed by borrowing.

"The ready availability of borrowed funds, the cost of which has tended to decline, has underpinned excessive consumption, and the feel-good factor of rising house prices has overidden fears of rising interest rates."

Mr Platts said some retail experts had predicted a railing back in consumer spending amid fears of rising interest rates.

While this did not happen over the festive period, such a trend may be on the way.

"Retail sales can be directly correlated with consumer confidence," said Mr Platts.

"In 2004, increases in direct taxation and below-inflation salary increases for the private sector will begin to bite."

He said: "Disposable income growth after tax that was running as high as six per cent in 2000 looks likely to have fallen to 1.5 per cent growth in 2003, and will probably remain the same this year.

"This decrease in the rate of disposable income growth will be an important drag on the appetite for new mortgages and, by association, the pace of house price appreciation.

"If that feel-good factor begins to wane, then customer confidence dries up and so do sales."

A spokesman for HMV, which has eight stores in the North-East and saw sales rise in the five weeks to January 3 by 6.6 per cent, said: "It is a competitive market place out there.

"The prevailing economic conditions are a key factor in trading performance, and like all major retailers, we are always vulnerable to economic trends and cycles."